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Senate Committee Holds Hearing on LIHTC Improvement and Expansion

The Senate Finance Committee held a hearing, “America’s Affordable Housing Crisis: Challenges and Solutions,” on August 1. The hearing focused on proposals to reform and enhance the Low Income Housing Tax Credit (LIHTC), including the “Affordable Housing Credit Improvement Act of 2017” (S.548). The Committee heard testimony from five witnesses: Daniel Garcia-Diaz, U.S. Government Accountability Office (GAO); Grant Whitaker, National Council of State Housing Agencies; Katherine O’Regan, New York University Furman Center For Real Estate and Urban Policy; Kirk McClure, School Of Public Policy and Administration, University of Kansas; and Granger MacDonald, National Association of Home Builders.

Committee members expressed their strong bipartisan support for preserving and enhancing LIHTC in any potential tax reform legislation, citing the importance of the tool in the context of America’s housing affordability crisis. Committee Chair Orrin Hatch (R-UT), who is an original cosponsor of S.548, pointed to the scale of the affordable housing shortage and urged bipartisan cooperation on a solution. “There seem to remain many households facing cost burdens associated with renting, with perhaps as much as 26 percent of renter households having paid more than half of their incomes in rent in 2015,” Mr. Hatch said. “This is a problem that should be ready for a bipartisan solution.” Senator Maria Cantwell (D-WA), who introduced S.548, urged action by Congress. “If we do nothing, the crisis will be exacerbated,” she said.

Members and witnesses also discussed several opportunities to improve LIHTC through reforms that help the program produce and preserve units more deeply targeted to people with extremely low incomes, reduce barriers to affordable housing development in high-cost “high opportunity” neighborhoods, and enhance federal oversight. As Dr. McClure noted, the LIHTC program would make even greater impact if it could produce more units affordable to households with extremely low incomes, whose needs are the greatest. S.548 makes improvements to LIHTC to achieve that.

Several Committee members praised the program’s design, which localizes decision-making and attracts private capital to affordable housing production. “One reason I support the Low Income Housing Tax Credit program is it allows decisions on affordable housing to be made in the communities where the housing is needed while involving the private sector,” stated Chair Hatch. Senator Johnny Isakson (R-GA) agreed. “I’m a big supporter of this program, and of Ms. Cantwell’s bill,” he said. “If we don’t do it, I can’t think of any other way to get private capital flowing to generate the housing necessary to house the American people.” Members and witnesses discussed the state-level compliance standards to which developers and investors must adhere in order to receive their LIHTC allocations.

In his testimony, Mr. Garcia-Diaz discussed a number of the GAO’s concerns regarding federal oversight of the program. Citing GAO findings that noncompliance reporting by state housing finance agencies was inconsistent in their frequency and detail and that the IRS did little to follow up on noncompliance reporting, Mr. Garcia-Diaz highlighted several ways to strengthen IRS oversight of the program. These included clarifying reporting requirements, improving tracking of properties placed in service, and using HUD as a resource to augment IRS’s monitoring and data collection capacity. “We believe that investing in oversight and accountability will help ensure that agencies meet program requirements, use federal resources effectively, and ultimately achieve the nation’s goal of providing poor and vulnerable families safe, decent, and affordable housing, which is so desperately needed today,” he said.

Several Committee members also discussed the connection between LIHTC’s efficacy and the availability of Congressionally-appropriated resources for rental assistance and affordable housing production. Senator Bob Menendez (R-NJ) stated that President Trump’s FY18 budget request, which proposes to slash federal rental assistance and community development programs, “would turn this affordable housing crisis into an epidemic.” Ms. Cantwell rejected the false choice between investing in affordable housing and fiscal discipline. “Doing nothing doesn’t save us any money,” she said. Dr. O’Regan agreed, citing research demonstrating how the lack of affordable housing shows up in other budgets in the form of higher health and criminal justice system costs. Dr. O’Regan also stressed that LIHTC alone is not enough to create units affordable to very low income families, and that there is a large overlap between LIHTC units and federal rental assistance programs targeted to very low income households. “Forty-seven percent of LIHTC units use some form of rental assistance,” she said.

S.548 and companion legislation in the House could advance either on their own or as part of tax reform legislation in the 115th Congress. Voicing his support for the program and S.548, Senator Sherrod Brown (D-OH) suggested it should be advanced with or without progress on tax reform. “LIHTC is critical,” he said. “It should be protected and expanded whether tax reform occurs in a bipartisan way or proceeds as a Republican fantasy.”